A state law enacted to
protect elderly Californians from financial abuse does not subject a bank to
liability for negligently processing transactions for a septuagenarian customer
who was being defrauded by a third party without the defendant’s knowledge,
this district’s Court of Appeal has ruled.

Div. Four, in a June 28
opinion certified Monday for publication, said Bank of America had no duty to
notify authorities of any deficiencies in Kaustubh K. Das’ ability to manage
his own finances.

Das suffered one or more
strokes in 2004 and died in 2008, following multiple organ failure. Following
his death, his daughter Baishali Das alleged in her complaint, it was
discovered that he had borrowed more than $100,000 to acquire a Georgia
property that was later foreclosed upon, and that in an effort to recoup his
losses, he became involved in lottery scams that cost him more than $300,000,
which he transferred to other countries from his Bank of America accounts.

Baishali Das, who
represented herself, alleged that if it had exercised reasonable diligence, the
bank would have noticed that her father was in no condition to manage these
large sums of money and would have notified authorities of the suspicious
nature of the transactions.

Duty Alleged

She alleged that Bank of
America had a duty under Welfare and Institutions Code Sec. 15630.1, part of
the Financial Elder Abuse Reporting Act of 2005, to report “suspected financial
abuse” it encountered “in connection with providing financial services with
respect to an elder” to local law enforcement or adult protective services
agencies.

A Los Angeles Superior
Court judge, in sustaining the bank’s demurrer, ruled that the statute does not
create negligence per se liability for failure to report under that section.
Justice Nora Manella, writing for the Court of Appeal, agreed.

Manella cited the
section’s subdivision (g), which provides that violators are subject to civil
penalties, that the penalties “shall be recovered only in a civil action
brought against the financial institution by the Attorney General, district
attorney, or county counsel,” that “[n]o action shall be brought under this
section by any person other than the Attorney General, district attorney, or
county counsel,” and that “[n]othing in the Financial Elder Abuse Reporting Act
of 2005 shall be construed to limit, expand, or otherwise modify any civil
liability or remedy that may exist under this or any other law.”

The quoted language, the
justice wrote, “expressly negates any inference of legislative intent to
enlarge the legal bases for a private civil action predicated on a bank’s
failure to report suspected financial abuse.”

Nor, she went on to say,
can the plaintiff plead a claim for direct financial abuse under another
section of the act that may allow for private enforcement, or for breach of
fiduciary duty or general negligence.

While a bank may be
liable to a depositor if it assists in a fraud or fails to act to protect the
customer upon becoming aware of one, the justice said, nothing in the complaint
alleges such culpability on Bank of America’s part. The mere allegation that
the bank was aware of Kaustubh Das’s impaired mental state, and that employees
“[w]ondered” about it as a result of his requesting hundreds of blank wire
transfer forms, was insufficient, Manella concluded.

“In our view, these
allegations do not establish tortious misconduct by respondent because they
fail to state even an adequate basis for rescission of a contract or
transaction under common law principles,” the jurist wrote. “The fact that a
person suffers from a measure of mental incapacity does not, by itself,
extinguish the person’s ability to participate in contractual relationships and
transactions.”

Attorneys for the bank
on appeal were Chaise R. Bivin, Eduardo Martorell and Jan T. Chilton of
Severson & Werson.